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Silicon Valley commercial real estate market expected to surge

By George AvalosOakland Tribune

Posted:
01/23/2014 06:03:20 AM PST

Construction crews work on the Samsung office complex towers rising up in the changing neighborhood near the intersection of North First Street and East Tasman Drive in San Jose, Calif., Wednesday, Dec. 18, 2013. The city is hoping to turn the area into a kind of mini-city where people can work, live and play. (Karl Mondon/Bay Area News Group)

SANTA CLARA -- The technology boom has a long way to run in Silicon Valley, and the region is poised for a fresh surge in commercial real estate activity during 2014, according to a closely watched forecast released Wednesday.

The optimistic outlook was outlined in a Cornish & Carey Commercial annual forecast about the valley's office, industrial and R&D realty sectors.

"This year should be as good as last year, if not better," said Phil Mahoney, a Cornish & Carey executive vice president. "The expansion continues."

During 2013, tenants filled 12.7 million square feet of research and development space, which was up 1.3 percent from 2012, according to Cornish & Carey. That is the sort of space that typically is filled by high-tech firms.

Rents for top quality research and office buildings will rise and vacancies will shrink during 2014, Mahoney predicted. Activity will continue to be stronger in the northern part of Santa Clara County, which includes cities such as Sunnyvale, Mountain View and Palo Alto, than in southern cities such as Santa Clara and San Jose.

Although a number of high-profile tech companies such as Twitter have sprouted or expanded in San Francisco in recent years, Mahoney believes the Silicon Valley regions of the South Bay and Peninsula maintain vital edges over San Francisco. Among those: Rents in San Francisco are in the range of $4.50 a square foot compared with $3.30 in Santa Clara County.

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Still, plenty of challenges face Santa Clara County as more people are hired to fill high-paying tech jobs, warned Russell Hancock, president of Joint Venture Silicon Valley.

"The economy in Silicon Valley is hot and will actually get hotter in the short run," Hancock said. "But in the long term, we have risks to the expansion. One of those is income inequality. This could become a land of protests and social unrest if we don't address this issue."

It's no surprise that the technology boom in Santa Clara County will persist during 2014, said Tim Bajarin, principal analyst with Campbell-based Creative Strategies, a market researcher and consultant.

While the PC market appears to have topped out at 300 million units shipped a year, Bajarin estimated that about 2.4 billion cell phones will ship this year, which includes 1.8 billion smart phones. Up to 300 million tablets are expected to ship this year, Bajarin said.

And even that may only be a precursor to more growth, according to Bajarin. The next technology surge is likely to be what some call the Internet of Things, a seamless world in which an array of mundane devices such as automobiles, appliances, home entertainment systems and other gadgets are all connected.